Poland – Populist Party Wins Strong Mandate

The parliamentary elections held on October 25 produced a resounding victory for the socially conservative and nationalist-populist PiS, which achieved the notable distinction of becoming the first party to win an outright majority in the 460-seat Parliament since the end of Communist rule in 1989, claiming 235 seats with just 37.6% of the vote. With the PiS controlling majorities in both houses of the Parliament and the presidency, the party will have a free hand to implement its campaign agenda.
PiS leader Jaroslaw Kaczynski is a controversial figure whose turn as prime minister in 2005–2007 was tumultuous and ended in failure, a record that figured in his decision to nominate his deputy, Beata Szydlo, as the PiS candidate for prime minister. However, there is little doubt that it is Kaczynski who will be calling the shots. The PiS leader has made clear that he favors a style of governance similar to that of populist Fidesz administration in Hungary, which features limited checks on the power of the prime minister, an active role for the state in economic affairs, and the defense of national interests even at the risk of alienating foreign investors and Poland’s partners in the EU.
The new government plans to adopt a less orthodox approach to economic policy, a prospect that contributed to post-election market volatility and has prompted warnings from credit-rating agencies of a possible downgrade of Poland’s debt rating. Particularly worrisome are signals that the PiS administration intends to weaken the independence of the central bank and to ignore a fiscal rule that mandates spending cuts if the public-sector debt exceeds the prescribed threshold. Quite apart from the possibility that overspending and slower-than-expected economic growth might result in a fiscal deficit larger than the EU permitted maximum of 3% of GDP, populist policies that weaken institutional checks on fiscal incontinence pose a threat to longer-term fiscal stability.
As for other elements of the Hungarian model that the Polish government intends to adopt, support for small businesses is welcome, a lending program financed by the central bank has proved successful, and a scheme that involves the conversion of mortgages denominated in Swiss francs to the weaker euro will help to alleviate a household debt burden that is constraining spending without inflicting lasting damage on investor confidence. However, the same cannot be said of tax increases on banks and the mainly foreign-owned supermarket sector, state support for the loss-making coal industry, the shelving of privatization plans, increased regulation of the labor market, and other proposed components of a broad strategy to protect Polish firms and workers.